UGP or WMB: Which Is the Better Value Stock Right Now?
Investors interested in stocks from the Oil and Gas - Production and Pipelines sector have probably already heard of Ultrapar Participacoes S.A. (UGP) and Williams Companies, Inc. (The) (WMB). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Ultrapar Participacoes S.A. and Williams Companies, Inc. (The) are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that UGP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
UGP currently has a forward P/E ratio of 15.78, while WMB has a forward P/E of 17.54. We also note that UGP has a PEG ratio of 4.63. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. WMB currently has a PEG ratio of 5.01.
Another notable valuation metric for UGP is its P/B ratio of 1.59. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, WMB has a P/B of 2.91.
These metrics, and several others, help UGP earn a Value grade of A, while WMB has been given a Value grade of C.
UGP is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that UGP is likely the superior value option right now.
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Ultrapar Participacoes S.A. (UGP) : Free Stock Analysis Report
Williams Companies, Inc. (The) (WMB) : Free Stock Analysis Report
